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Close Corporations

A ‘close corporation’ is similar to a company. It is a legal entity incorporated according to certain formalities stipulated in the Close Corporations Act 1984. It is registered with the suffix ‘CC’, and given a number, by the Companies and Intellectual Property Commission.

The scheme of close corporations was introduced to make it easier for people to operate businesses through a corporate entity, but without several of the formalities of a registered company. Since the Companies Act 2008 came into force, however, it has been no longer possible to register CCs.

  1. It is a criminal offence to use, with any trading name, the abbreviation ‘CC’, or the words ‘close corporation’ if you are not registered as a close corporation under the Act.1

  2. No close corporation may loan any property to its members, or any other entity controlled by its members, and anyone who authorises such a loan is guilty of an offence.

  3. No close corporation may give credit to any of its members or any other entity controlled by its members, except on terms applicable to normal business practice, and anyone who authorises such credit is guilty of an offence.2

  4. Every close corporation must keep proper accounting records which show:
    • its assets and liabilities;
    • member’s contributions;
    • undrawn profits;
    • loans to and from members;
    • a register of fixed assets (showing dates of acquisition, cost, depreciation, re-evaluation, and date of disposal and sale price);
    • cash receipts;
    • expenditure;
    • credit sales and purchases; and
    • annual stocktaking.

    Every member is guilty of an offence if their close corporation fails to keep these records.3

  5. If a close corporation carries on business recklessly, or with gross negligence, or for any fraudulent purpose, every person who is a party to such trading commits a criminal offence.4

  6. It is a criminal offence for any official to disclose any confidential information concerning the affairs of any person obtained as a result of a complaint, or proceedings, or whilst carrying out any function in terms of the Act.5

  7. It is also an offence:
    • to falsify any accounting records of a CC;
    • when the Act requires information to be furnished, to provide false or misleading information;
    • to be involved in a deed which has any fraudulent purpose;
    • to prepare, approve or publish a prospectus that contains an untrue statement.
  8. It is an offence to:
    • fail to satisfy a compliance notice issued in terms of the Act;
    • obstruct or attempt to influence anyone exercising a power or performing a duty in terms of the Act;
    • do anything in connection with an investigation, or hearing, akin to contempt of court;
    • refuse to attend an investigation, or hearing, when summoned;
    • refuse to answer any question, or produce any document required by the summons;
    • provide false information to the investigation or hearing;
    • frustrate or impede the execution of a warrant to enter and search; and
    • if you are an official, act contrary to, or in excess of, a warrant to enter and search.6

  1. Section 22A. ↩

  2. Section 53(1)(b). ↩

  3. Section 56(5)(a). ↩

  4. Section 64(2). ↩

  5. Section 82 read together with Parts D, E and F of Chapter 7, and Part A of Chapter 9 of the Companies Act, 71 of 2008. ↩

  6. Section 82 read together with Parts D, E and F of Chapter 7, and Part A of Chapter 9 of the Companies Act, 71 of 2008. ↩

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